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Monte Carlo simulation of macroeconomic risk with a continuum of agents: the symmetric case

  • Peter J. Hammond
  • Yeneng Sun

Suppose a large economy with individual risk is modeled by a continuum of pairwise exchangeable random variables (i.i.d., in particular). Then the relevant stochastic process is jointly measurable only in degenerate cases. Yet in Monte Carlo simulation, the average of a large finite draw of the random variables converges almost surely. Several necessary and sufficient conditions for such “Monte Carlo convergence” are given. Also, conditioned on the associated Monte Carlo -algebra, which represents macroeconomic risk, individual agents' random shocks are independent. Furthermore, a converse to one version of the classical law of large numbers is proved. Copyright Springer-Verlag Berlin Heidelberg 2003

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File URL: http://hdl.handle.net/10.1007/s00199-002-0302-y
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Article provided by Springer in its journal Economic Theory.

Volume (Year): 21 (2003)
Issue (Month): 2 (03)
Pages: 743-766

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Handle: RePEc:spr:joecth:v:21:y:2003:i:2:p:743-766
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